RIM Co-CEOs To Step Down; COO To Take The Reins

I suppose some might have seen this coming. In December, Research In Motion (RIM) released their third quarter earnings, which were yet another disappointment for the struggling maker of BlackBerry. RIM Co-CEOs Jim Balsillie and Mike Lazaridis announced subsequently that they would only draw yearly salaries of $1 to help combat the company’s financial woes.

Today, it seems the pressure has become too great, and a management shuffle is under way. The Globe has reported that the co-CEOs, after a year of pressure from investors and stockholders, have stepped down from the position. Company insider and current COO Thorsten Heins will be replacing them as the new chief executive.

Lazaridis and Balsillie have both led the Waterloo-based company for decades, as Lazardis founded RIM back in 1984 and later brought on Balsillie. Balsillie stepped down from his role as Chairman in 2007, but retained his position as co-CEO along with Lazaridis. Today, the founder will become vice chairman of the board along with chair of the board’s new “Innovations Committee”, and Balsillie will remain a board member — but with no functional operating role in RIM going forward, according to Bloomberg.

RIM Director Barbara Stymiest is to take over as chairman of the board, and Thorsten Heins, the current COO is now the top dog. Heins joined RIM four years ago from Siemens AG, where he was the CTO.

The struggles of the Canadian mobile device maker have been well-documented. BlackBerries reached a point of ubiquity over the last decade, especially in corporate environments, but RIM has had a difficult time keeping pace with Apple and the meteoric rise of Android. The company has also struggled to produce a viable tablet alternative, with sales of its PlayBook declining — it shipped 150,000 of these devices, the company said in its third quarter earnings, down from 200,000 in Q2.

Since laying off 2,000 employees in July of last year, RIM has gotten aggressive with its promotions and price cuts for PlayBook, but the competition continues to eat into the company’s market share, as its portion of the smartphone market dipped to 11 percent — down from 15 percent the previous year.

It’s been a very rocky road for RIM, and really it’s a sad story to watch unfold, as RIM has been one of the most valuable companies in Canada, and has ranked in the country’s top 100 employers. It also experienced one of its worst outages in history in October, and some of its top investors pushed the company to split up its co-CEO leadership last summer, which was later withdrawn.

Now, it seems, RIM’s investors have finally gotten their way, and RIM has opted to replace the Co-CEOs with an insider. Heins was previously the chief operating officer for product and sales, a position he took in August, charged with overseeing engineering, hardware and software.

There comes a time in the growth of every successful company when the founders recognize the need to pass the baton to new leadership. Jim and I went to the Board and told them that we thought that time was now. With BlackBerry 7 now out, PlayBook 2.0 shipping in February and BlackBerry 10 expected to ship later this year, the company is entering a new phase, and we felt it was time for a new leader to take it through that phase and beyond. Jim, the Board and I all agreed that leader should be Thorsten Heins.

Even though he has the full support of Balsillie, Lazaridis, and the board, Heins has a tough road ahead. Sure, many are hoping that he can help RIM turn itself around, myself included, but both RIM and Heins will have to assure investors, customers, and everyone in between, that he is not operating in the shadow of the former CEOs and will be given the necessary room to implement structural and product changes, and start catalyzing the growth and development that can help them regain lost ground.

In terms of potential for RIM moving forward, Heins said in a statement that the company still has a strong balance sheet, with $1.5 billion in cash at the end of last quarter, and little to no debt. Revenues were $5.2 billion in the third quarter, and it’s undeniable that RIM has a strong BlackBerry subscriber base — currently over 75 million.

If RIM can gain some traction with PlayBook 2.0 and BlackBerry 10, there may be a silver lining. RIM gave a sneak peak of PlayBook 2.0 at CES this year, and Devin included the company in our list of winners for this year’s CES, saying that they’re still showing that they are a “force to be reckoned with in some respects”, and that the “PlayBook is a far better tablet than it was, and that Google and Apple should take a look at some of their clever and powerful gesture and UI work”. Let’s just hope it’s not too late.

BlackBerry 10 has been delayed, leading many to speculate that there have been some problems with its development, in integrating that software with its global network, but Heins hinted to the New York Times that he wants to see BlackBerry 10 released at some point this year. After 18 months in development, it seems clear that RIM has been handicapped in its decision-making process, and unfortunately, it puts all the more pressure on the new OS to shine when it arrives. They missed with the first release of PlayBook, and have been scrambling to iterate quickly. Devin’s impressions show that it may be working, but initial poor reviews may have put the kibosh on that one.

At least it seems more determined now to play to the concerns of its detractors, rather than ignoring the problems. This may instill some confidence going forward, and with Heins in the big chair, it looks like stay-the-course is RIM’s new motto, and those buyout rumors will quiet down — at least for now.

As an addendum, I’ll say that it’s interesting to note that RIM released this news right in the midst of the NFC Championship — a highly watched TV event and one that sparks an enormous amount of coverage in traditional media and on the Web. (More here.)